Business Model
Revenue streams, pricing strategy, cost structure, and unit economics.
1. Facility Concept
Overview
Luxa Salon Suites is an independent, owner-operated salon suite facility providing private, move-in-ready mini-salon spaces to independent beauty and wellness professionals in South Riding, Virginia.
Facility Parameters
| Parameter | Target | Rationale |
|---|---|---|
| Suite Count | 18 suites (baseline) | Optimal balance of revenue potential and lease-up risk |
| Target Square Footage | 3,000-3,500 sq ft | 18 suites averaging 140 sq ft + 20% common area |
| Suite Size Range | 100-200 sq ft | Accommodates all professional types |
| Common Area | 600-700 sq ft | Break room, laundry, reception, hallways |
| Location | South Riding, VA core | Second operator in underserved market |
Facility Size Validation
Market Sizing Support (from Phase 1):
- SAM: 75-111 suite rental candidates in trade area
- SOM: 9-24 suites achievable capture at stabilization
- Existing supply: 61 suites in direct trade area (5-mile)
18-Suite Rationale:
- Captures 16% of SAM at 100% occupancy (within target range)
- Matches Sola Chantilly scale (18 suites) - proven market capacity
- Manageable build-out cost for initial capital ($300K-$400K estimate)
- Achievable 85%+ occupancy based on competitor waitlists
Operating Model
| Element | Approach | Benefit |
|---|---|---|
| Ownership | Independent (no franchise) | No royalties, full control, higher margins |
| Management | Owner-operated initially | Concierge service, lower overhead |
| Staffing | Self-managed Year 1-2 | Reduce operating costs during ramp-up |
| Maintenance | Mix of owner + contracted | Leverage contractor relationships |
2. Suite Configuration
Four-Tier Suite Structure
Based on Phase 2 positioning analysis, Luxa Salon Suites will offer four distinct suite tiers:
| Suite Type | Size | Weekly Rate | Monthly Rate | Target Tenant |
|---|---|---|---|---|
| Standard | 100 sq ft | $285/week | $1,140/month | Entry-level independents, booth rental converts |
| Plus | 130 sq ft | $315/week | $1,260/month | Established professionals, growth-oriented |
| Large | 160 sq ft | $345/week | $1,380/month | Dual-station operators, small teams |
| Executive | 200 sq ft | $385/week | $1,540/month | Premium/specialty, high-volume professionals |
Recommended Suite Mix (18-Suite Baseline)
| Suite Type | Count | % of Facility | Monthly Revenue | Notes |
|---|---|---|---|---|
| Standard | 8 | 44% | $9,120 | Highest demand tier, entry point |
| Plus | 5 | 28% | $6,300 | Mid-tier, upgrade path |
| Large | 3 | 17% | $4,140 | Limited demand, higher revenue |
| Executive | 2 | 11% | $3,080 | Premium positioning, specialty |
| TOTAL | 18 | 100% | $22,640 | At 100% occupancy |
Suite Mix Calculation Validation
Square Footage Check:
- Standard: 8 suites x 100 sq ft = 800 sq ft
- Plus: 5 suites x 130 sq ft = 650 sq ft
- Large: 3 suites x 160 sq ft = 480 sq ft
- Executive: 2 suites x 200 sq ft = 400 sq ft
- Suite Total: 2,330 sq ft
- Common Area (20%): 583 sq ft
- Gross Facility: 2,913 sq ft (within 3,000-3,500 target)
Blended Rate Check:
- Total Monthly Revenue: $22,640
- Total Suites: 18
- Blended Average: $1,258/month = $315/week
- Target: ~$300/week - slightly above target (favorable)
Double Suite Option
For growth-oriented tenants, Luxa offers the option to combine two adjacent suites:
| Configuration | Combined Size | Weekly Rate | Monthly Rate |
|---|---|---|---|
| Standard + Standard | 200 sq ft | $545/week | $2,180/month |
| Plus + Standard | 230 sq ft | $575/week | $2,300/month |
| Plus + Plus | 260 sq ft | $600/week | $2,400/month |
Policy: Double suite tenants sign single lease with 12-month minimum commitment. Pricing reflects 5% discount from combined individual rates.
3. Revenue Model
Base Rent Structure
Luxa Salon Suites operates a pure rental model with no commission on tenant services. Revenue streams:
| Revenue Type | Included | Notes |
|---|---|---|
| Weekly Suite Rent | Primary revenue | Collected weekly via autopay |
| Security Deposit | Refundable | First + last week equivalent |
| Late Fees | Ancillary | $25 + $10/day after 3-day grace |
| Commission on Services | NOT included | Tenants keep 100% of earnings |
| Retail Commission | NOT included | Tenants manage own retail |
Revenue Projections by Occupancy
18-Suite Facility at Blended $315/week Average:
| Occupancy | Occupied Suites | Weekly Revenue | Monthly Revenue | Annual Revenue |
|---|---|---|---|---|
| 60% | 10.8 | $3,402 | $14,709 | $176,508 |
| 75% | 13.5 | $4,253 | $18,386 | $220,635 |
| 85% | 15.3 | $4,820 | $20,838 | $250,053 |
| 95% | 17.1 | $5,387 | $23,289 | $279,471 |
| 100% | 18.0 | $5,670 | $24,510 | $294,120 |
Stabilization Timeline
Based on Phase 1 market analysis and competitor lease-up patterns:
| Phase | Months | Target Occupancy | Monthly Revenue |
|---|---|---|---|
| Pre-Opening | 0 | 30-40% pre-leased | N/A |
| Launch | 1-3 | 50-60% | $12,255-$14,706 |
| Ramp-Up | 4-12 | 65-80% | $15,932-$19,608 |
| Stabilization | 13-24 | 85-95% | $20,838-$23,289 |
| Mature | 25+ | 90-95% | $22,059-$23,289 |
Ancillary Revenue Opportunities
| Source | Implementation | Estimated Annual Revenue |
|---|---|---|
| Product Lockers | Optional rental for retail storage | $1,200-$2,400 (10-20 lockers at $10/month) |
| Laundry | Self-service coin/card operated | $1,500-$3,000 (recovery of utility costs) |
| Late Fees | Automatic billing system | $500-$1,500 (target minimal) |
| Suite Upgrades | Tenant-requested improvements | Variable (pass-through cost + 15%) |
Total Ancillary Potential: $3,200-$6,900/year (1-2% of base rent)
4. Service Model
Included Services (No Additional Charge)
Concierge Services:
| Service | Description | Delivery |
|---|---|---|
| Reception Presence | Business hours presence (TBD: 10am-6pm?) | Owner/staff |
| Package Handling | Accept and secure deliveries | Daily |
| Client Greeting | Assist lost/confused clients | As needed |
| Basic Maintenance | Light bulbs, minor repairs, cleaning supplies | Within 24 hours |
| Tenant Onboarding | Suite setup, systems training, orientation | Day 1 |
| Business Support | Basic guidance, referrals to resources | As requested |
Self-Service Amenities:
| Amenity | Availability | Notes |
|---|---|---|
| 24/7 Suite Access | Always | Electronic key/code system |
| WiFi | Always | Business-grade, dedicated per suite |
| Utilities | Included | Electric, water, HVAC |
| Break Room | Always | Microwave, refrigerator, sink, seating |
| Laundry Facilities | Always | Washer/dryer (coin/card operated) |
| Shared Restrooms | Always | Cleaned daily |
| Parking | As available | Per property lease terms |
Building Systems:
| System | Standard |
|---|---|
| HVAC | Individual suite temperature control |
| Lighting | Professional salon lighting, dimmable |
| Electrical | Adequate outlets for salon equipment |
| Plumbing | Shampoo bowl connection (most suites) |
| Ventilation | Proper exhaust for chemical services |
NOT Included Services
| Service | Reason | Alternative |
|---|---|---|
| Client Booking | Tenants are independent businesses | Recommend booking software |
| Retail Sales | Tenants manage own inventory | Wholesale vendor referrals |
| Marketing/Advertising | Beyond our business model | Marketing resources/referrals |
| Appointment Answering | Liability and complexity | Virtual receptionist referrals |
| Equipment Provision | Cost and maintenance | FF&E package available at move-in |
| Product Provision | Margins and logistics | Wholesale account assistance |
Service Model Differentiator
Owner-Operated Concierge Advantage:
Unlike franchise competitors (Sola) with minimal on-site presence, and matching Phenix Salon Suites' concierge model:
- Owner present during business hours (initially)
- Direct relationship with every tenant
- Faster response to issues and requests
- Personal investment in tenant success
- Flexibility to add services based on feedback
5. Lease Terms
Standard Lease Structure
| Term | Standard | Notes |
|---|---|---|
| Minimum Term | 6 months | Initial commitment required |
| After Minimum | Month-to-month | Flexibility for tenants |
| Notice Period | 30 days | After initial term |
| Rent Collection | Weekly (autopay required) | Reduces default risk |
| Payment Method | ACH/Credit Card | Automated billing |
Deposit Structure
| Deposit Type | Amount | Refundable |
|---|---|---|
| Security Deposit | 2 weeks rent | Yes, less damages |
| Last Month Rent | N/A (weekly billing) | N/A |
| Key/Access Deposit | $50 | Yes, upon return |
| Total Move-In Cost | 2 weeks rent + first week + $50 | Example: Standard suite = $620 |
Rent Escalation
| Year | Escalation | Rationale |
|---|---|---|
| Year 1 | Base rate | Introductory |
| Year 2+ | 3% annual increase | Covers inflation, maintains margins |
Escalation Policy:
- Applied on lease anniversary (for term leases) or annually (for month-to-month)
- 60-day written notice required
- Maximum 3% per year (predictable for tenants)
Move-In/Move-Out Policies
Move-In:
- Suite available day after lease signing and deposit clearing
- Initial suite walkthrough with owner
- Systems orientation (access, WiFi, HVAC, laundry)
- Welcome packet with policies, contacts, resources
- First week rent due at signing
Move-Out:
- 30-day written notice required
- Final walkthrough scheduled for last day
- Suite must be returned to original condition (reasonable wear excepted)
- Deposit refund within 14 days of walkthrough (less deductions)
- Key/access return required
Deduction Schedule (from deposit):
| Item | Standard Charge |
|---|---|
| Hole patching | $25/hole |
| Paint touch-up | $50-$150 |
| Full repaint | $300-$500 |
| Cleaning | $150 minimum |
| Lock re-keying | $75 |
| Damage repairs | Actual cost |
Lease Flexibility Options
| Option | Terms | Benefit |
|---|---|---|
| Suite Upgrade | Move to larger suite, new 6-month minimum | Growth path |
| Suite Downgrade | Move to smaller suite, 30-day notice | Cost reduction |
| Temporary Absence | Up to 2 months at 50% rent | Maternity, medical, travel |
| Early Termination | Forfeit deposit + 30 days notice | Exit option |
6. Financial Summary
Revenue Model Summary
| Metric | Conservative | Target | Optimistic |
|---|---|---|---|
| Suite Count | 18 | 18 | 18 |
| Stabilized Occupancy | 75% | 85% | 95% |
| Blended Weekly Rate | $300 | $315 | $330 |
| Monthly Gross Revenue | $17,550 | $20,838 | $24,354 |
| Annual Gross Revenue | $210,600 | $250,053 | $292,248 |
| Ancillary Revenue | $3,000 | $5,000 | $7,000 |
| Total Annual Revenue | $213,600 | $255,053 | $299,248 |
Key Business Model Metrics
| Metric | Target | Industry Benchmark |
|---|---|---|
| Revenue per Suite (annual) | $14,170 | $12,000-$16,000 |
| Revenue per Sq Ft (annual) | $75-$85 | $65-$90 |
| Tenant Turnover Rate | 15-20% | 15-25% |
| Average Tenant Tenure | 2-3 years | 2-4 years |
| Occupancy at Break-Even | ~65% | 60-70% |
Appendix: Suite Configuration Diagrams
Standard Suite (100 sq ft) - 8 units
+------------------+
| STATION |
| [Mirror + Chair]|
| |
| [Styling Cart] |
| |
| [Retail/Storage]|
| [Entry] |
+------------------+
Best For: Hairstylists, barbers, basic nail services
Plus Suite (130 sq ft) - 5 units
+----------------------+
| STATION |
| [Mirror + Chair] |
| |
| [Shampoo] [Cart] |
| |
| [Storage/Retail] |
| [Entry] |
+----------------------+
Best For: Full-service hairstylists, estheticians, combo services
Large Suite (160 sq ft) - 3 units
+-------------------------+
| STATION 1 STATION 2 |
| [Chair/Table] [Optional]|
| |
| [Shampoo] [Cart] |
| |
| [Storage/Retail] |
| [Entry] |
+-------------------------+
Best For: Dual-station stylists, teams, nail + facial combo
Executive Suite (200 sq ft) - 2 units
+-------------------------------+
| STATION 1 [Work Area] |
| [Chair/Table] [Assistant] |
| |
| [Shampoo] [Waiting Area] |
| |
| [Storage] [Retail] |
| [Entry] |
+-------------------------------+
Best For: Premium stylists, medical aesthetics, massage therapy
Business Model Complete - Ready for Phase 4 Design Integration Phase 3: Concept & Positioning - Task 1 Complete
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